December 6, 2016 | by Gonzalo Schwarz Print

The Archbridge Institute is a new Atlas Network partner devoted to rekindling the American dream of opportunity and earned success in the United States and around the world. The organization’s president and CEO, Gonzalo Schwarz, is a longtime veteran of both Atlas Network and the broader worldwide freedom movement. In this commentary, Schwarz introduces the Archbridge Institute and provides crucial background about the decline of economic mobility in the United States and other developed countries.

My wife Stephanie and I immigrated to the United States eight years ago. We left Latin American countries that could not deliver the opportunities that are essential to economic mobility. We saw firsthand what made America great — its institutions and culture of entrepreneurship.

For Christmas, our five-year-old son Sebastian wants a Hot Wheels Ultimate Garage. Our two-year-old daughter Arianna will also play with those cars, although we will continue to try to get her to like dolls. Despite these presents and all the presents in the years to come, however, my wife and I think the best present we ever could have given our two kids was to be born in the United States. This is one of the few countries in which you can tell your kids, “You can be anything you want,” where that assurance can actually come true.

We believe that this country provides the greatest opportunities in the world, although both left and right agree that economic mobility here has stagnated. As we have taken a closer look at U.S. policies, it has become clear that some of the same structural limits to mobility that afflict Latin America could also be holding back the United States.

Political campaigns rarely focus on substantive economic issues, but the 2016 presidential campaign provided a glimpse of substance when both political parties focused on promoting economic opportunity. A sea of personal attacks and accusations often drowned out this idea, but candidates and parties did focus some of their rhetoric on reviving the American Dream. Their attention to the problem is admirable, but the prescriptions of both major political parties overlook the true barriers that stand in the way of struggling Americans.

A land of opportunity

America’s founders also worried about opportunity, although they didn’t share the modern world’s emphasis on unequal outcomes. They listed in the Declaration of Independence their grievances about the British crown’s unequal treatment of the colonies, including vast disrespect for the rule of law, a lack of trade, and high taxes. The founders understood that the United States would become a land of opportunity if the government established an environment of due process, self-determination, trade, and low taxes — and people were left to their own devices.

Today’s research on income inequality and economic mobility misses this reality, instead focusing on symptoms or consequences. Residential mobility and important social issues like out-of-wedlock births and welfare dependency are all relevant, and addressing them is necessary to promote opportunity, but they are not sufficient means to ensure the American Dream of economic mobility.

Miles Corak, a University of Ottawa economist, is one of the leading researchers in the field. In his seminal work, he correlated income mobility and inequality in a graph showing that countries with low mobility also have high inequality. Corak’s graph was later titled “The Great Gatsby Curve” by Alan Krueger, a Princeton professor and former chairman of President Barack Obama’s council of economic advisers. In this curve, Scandinavian countries fared better with a combination of less inequality and more mobility, while countries like the United States and the United Kingdom fared worse with comparatively more inequality and less mobility. This is only a correlation, however, and several other authors have argued that not only is the correlation slight, there is also no causal connection. One of these detractors, sociologist Scott Winship, is a member of the Archbridge Institute’s board of academic advisors. Regardless, the Great Gatsby Curve narrative persists, and drives much of the policy discussion both in developed and underdeveloped countries.

Structural economic problems

Corak says of his research, “Analyzing a broader group of countries, I find that many of the lower-income countries occupy an even higher place on The Great Gatsby Curve than depicted for the OECD countries, but this is likely due to structural factors not as relevant to a discussion of the high-income countries.”

Those structural problems in low-income countries may, however, provide the richest explanations about obstacles to income mobility and decreased inequality of opportunity. They may also offer a guide to understanding why even some developed countries are struggling to increase upward mobility. Recent research shows that business dynamism, the rate at which new businesses are created and older ones fail, has steadily declined in the United States since the end of the 1970s. Firm entry, the percentage of firms less than a year old as a proportion of total firms, has consistently decreased from almost 15 percent in 1978 to 8 percent in 2011.

The World Economic Forum’s Global Competitiveness Index ranks the United States third overall, but places its institutions in a dismal 28th place, which shows a serious structural weakness. The World Bank’s Doing Business index ranks the United States in 51th place for ease of starting a business, despite its overall seventh-place position, which could help to explain the country’s decline in new businesses formation. Even more troubling, the World Justice Project’s Rule of Law index ranks the United States as 18th worldwide, which belies the country’s reputation as a beacon of justice and due process. These rankings are imprecise, but together they point to a decline in the quintessential American ideals of entrepreneurship and the rule of law — the true structural pillars of economic mobility.

Rekindling the American Dream

As a newly established organization, the Archbridge Institute is devoted to rekindling the American Dream of opportunity and earned success in the United States and around the world. It accomplishes this mission by producing, funding, and disseminating multidisciplinary academic and policy research that will lift barriers to economic mobility through principles of personal responsibility, the rule of law, and entrepreneurship. We want to tackle all of these issues directly, with precision, and address the lack of research into the structural causes of immobility and the real causes of unjust inequalities of opportunity. Our objectives are to develop new multidisciplinary research on causes and potential solutions for more income mobility and shift the debate away from inequality to focus on income mobility and the barriers people face in pursuing their dreams and happiness.

Throughout my first steps in founding this organization, I’ve benefited from the wisdom of many mentors and friends, and I have been fortunate to obtain the support of an amazing board of directors filled with exemplary individuals. They have been an immense source of support, both in terms of their own work and helping to launch the Archbridge Institute’s forthcoming series of American Dream narratives.

I have been inspired by Atlas Network founder Antony Fisher’s quest to influence public opinion and policymaking through the creation of new public policy think tanks throughout the world, one of the most effective vehicles for policy reform. While managing the Templeton Freedom Award during my tenure at Atlas Network, I had the privilege and honor of learning best practices from some of the best think tanks in the world. Templeton Freedom Award winners and finalist organizations have been exemplary and truly inspirational, as have the other excellent think tanks I’ve worked with in the many impact-driven projects I’ve managed over the years. They have helped me to see that ideas have consequences, and that those consequences are the result of hard work — strategic, intentional, and forward-looking.

I’ve learned the most about think tanks from another great inspiration and closer mentor, Alejandro Chafuen, with whom I’ve worked closely during my past six years at Atlas Network. Alex’s relentless character and work ethic has inspired so many people to live up to his example by trying to become leaders in their own right. I hope he is satisfied that his work is having an impact, both on his own merits and through the many mentees he has nurtured.  I’ve also been inspired by the amazing intellect of the late Leonard Liggio, Atlas Network’s longtime executive vice president of academics, who always dug deep into the historical roots of today’s many problems. Leonard’s intellectual mantle is worn and graciously carried on today by another of my role models, Atlas Network’s George M. Yeager Chair for Advancing Liberty, Tom G. Palmer.

Why I do what I do

One of my more recent mentors, American Enterprise Institute President Arthur Brooks, always suggests that we should explain why we do the things that we do, rather than simply saying what it is that we do. I hope that my attempt at an explanation will serve as motivation both for the organization and for the rest of my career. I do what I do because, by trying to rekindle the American Dream in the United States and abroad, I’m pursuing my own American Dream. The American Dream is sometimes reduced to a caricature of just owning a home or a car, but it really entails the pursuit of happiness in any number of ways. Today, I’m pursuing happiness by trying my best to eliminate barriers to opportunity, to lift lives through increased upward mobility, and to maintain the hope of increased opportunity for my children so that they can pursue their own dreams.

I’m also motivated by the firm belief that the widespread lack of appreciation for the role of entrepreneurship in society is a primary obstacle to true development and societal progress. We don’t need to idolize businessmen or entrepreneurs, but we should recognize that their innovation and competition is the cornerstone of value creation. Their work is a foundation that provides a variety of options for other people to pursue their own dreams, whatever they may be, through freedom of association.

I believe that a disdain for wealth creation, and for the role of the entrepreneurs in society, is an affront to human dignity. This can be seen most readily in the income inequality and mobility debate. By focusing on redistribution and class warfare, policymakers and elites demonstrate how they lack understanding of the practical value that entrepreneurship provides as an alternative to an ever-changing economic and social landscape.

The great economist Deirdre McCloskey provides a thorough explanation of the role of entrepreneurs in her book Bourgeois Dignity: Why Economics Can't Explain the Modern World, and summarizes her perspective in a more recent essay, “Liberty and Dignity Explain the Modern World,” as well as in her contribution the book The Morality of Capitalism: What Your Professors Won’t Tell You, edited by Tom G. Palmer.

“[D]epending exclusively on economic materialism to explain the modern world, whether left-wing materialism or right-wing economics, is mistaken,” McCloskey writes. “Ideas of human dignity and liberty did the trick. As the economic historian Joel Mokyr puts it, ‘economic change in all periods depends, more than most economists think, on what people believe.’ The gigantic material changes [of the industrial revolution] were the outcome, not the cause. It was ideas, or ‘rhetoric,’ that caused our enrichment, and with it our modern liberties.”

People don’t immigrate to the United States because of baseball or Disneyworld, and certainly not because of the Kardashians. They come here in search of improving their human dignity, and to seek opportunities for improving their lives and the lives of their children. I think the potential exists for all countries to experience their own versions of the American Dream, as long as they ground their policies on local knowledge, individual responsibility, strong institutions, and an appreciation of the role of entrepreneurship in society.

Gonzalo Schwarz portrait
Gonzalo Schwarz is president and CEO of the Archbridge Institute, a newly established public policy think tank devoted to rekindling the American Dream by lifting barriers for upward mobility. Learn More about Gonzalo Schwarz >